How Do US Citizens In Thailand Own US Mutual Funds

[Mike45]

I have read many of the posts on TV about how to set up my banking and finances before I leave the US. I decided that I needed a place to have my future Social Security checks directly deposited in the US so I could do a periodic wire transfer to my new residence in Thailand.

I specifically read about Schwab. http://www.thaivisa.com/forum/index.php?sh...13679&st=30

With a 25K USD minimum investment I could have an account that would accept my Social Security direct deposit and they offer some free wire transfers. I can also buy CD's at attractive rates with Schwab. I contacted Schwab to get more information and an application. During the conversation I inquired about what mutual funds would be available to me. I was told that only mutual funds that are registered in Thailand would be available to me. There was a question about legality. I asked for a list. This is the email I received.

Dear Michael,

Thank you for your call today.

Unfortunately, I have just learned that as a US citizen residing in a foreign country, you would not be able to purchase any mutual fund.

Please call me if you have any additional questions.

Thanks

Jana Castle

Investment Consultant

1-888-294-7281ext 64023

Charles Schwab & Co.

Inbound Business Development

7:30 am to 4 pm Phoenix time

I definitely want to keep investing in my Index funds when I live in Thailand. How are other US citizens investing in US Mutual funds?

Thanks

Edited August 24, 2007 by Mike45

[jumnien]

Find another rep of the company. It won't be a problem.

[Jingthing]

You are correct. It is technically illegal. I got the same information. However, the way around this is to keep a US address of record. Don't ask, don't tell. The US isn't especially friendly to her expats. Be happy you were able to get a passport.

Edited August 24, 2007 by Jingthing

[qualtrough]

I can confirm Jingthing advice. I ran into the same problem several years back. Switched my address of record to my parents house and that took care of it. You can still get reports etc. to you e-mail address so you really don't miss anything.

Anybody know the reason behind the rule??

[Jingthing]

Could be security and exchange commission rules. The advise to contact another rep at Schwab is bad advise. They will all tell you the same thing if you say you are not a US resident.

[lopburi3]

Obviously my mutual fund company is not aware of any such legal block as I have been using my Bangkok address for the past ten years for trades, reports, statements and withdrawal checks. Perhaps it is only for the financial account that they have the problem? I do not use Schwab or have a bank type financial account.

[Sulaphat]

My understanding (and I admit I may not be correct on this) is that the financial institutions in the US are afraid of being in violation of Thai laws. I think I read somewhere that the Thai securities regulators prohibit the sale of unregistered (in Thailand) investment vehicles to the Thai public, which they define as anyone physically present in Thailand. Anybody in the securities industry have more info on this?

Best bet is to open the account using a US address. Some finanical institutions might allow you to change it to a foreign address later. Some might not.

[calibanjr.]

You are correct. It is technically illegal. I got the same information. However, the way around this is to keep a US address of record. Don't ask, don't tell. The US isn't especially friendly to her expats. Be happy you were able to get a passport.

That's where my mind's at! Nice to see people with similar views, cuts down on the paranoia-induced edginess.

[Carmine6]

Sounds pretty odd. I can't imagine it being illegal but I can see it being a policy. Searching the SEC's website right now to see if there's any info.

[JaiGuru]

http://www.usglobalmail.com/default.asp

Works for me, and it can all be done from LOS.

[Carmine6]

Sounds pretty odd. I can't imagine it being illegal but I can see it being a policy. Searching the SEC's website right now to see if there's any info.

No luck at the SEC website as they have a terrible search engine and even worse site organization.

The reason I think it would be odd if it were illegal is that military living off base overseas would not be able to own US mutual funds. Or folks just over the border in Canada.

One thing handy these days is that you can elect electronic only delivery of statements and other communications from many financial firms. Even some proxy statements and prospectuses can be set up this way. This will cut down on the mailings going to your relatives or mail forwarding services. Also keeps financial data out of other's hands.

[Jingthing]

It could be some brokerage houses allow it and others do not. I have heard of this problem before about other brokerage houses and I had the same experience as the OP with Schwab. Since I use a US address, no problem so far.

[tracer5050]

I don t know about Mutual funds? But i had a problem with my U S bank transfering my retirement check each month to Thailand . So i have a Bangkok bank account , in LOS.

I then have my US bank when I call transfere to Bangkok bank in New york the money i want , not a international tranfere. 2 days later in my account in LOS.

Works for me . Maybe Yes , Maybe Yes

[jumnien]

I've used Morgan Stanley and Wells Fargo Bank to hold mutual funds for many years now (10, next month) here in Thailand. Like others have said, it is very helpful to keep a US address for banking purposes. I highly recommend hanging on to a US credit card and ATM card as well.

[Jimjim]

Keep a residency in the U.S. and that should do it. Use your family's address or something.

[ProThaiExpat]

Mike45: I agree with the information posted in this thread so far. However, you use the term 'mutual funds" and index funds interchangeably. I will make a distinction, as Schwab treats them differently for foreign investors.

I too was told by Schwab that I could not trade in U.S. listed Mutual Funds. However, I was told I could trade in ETF's, Exchange Traded Funds, a form of mutual fund perhaps.

I have been trading in QQQQ for years now at Schwab, while in Thailand with a Thai address on my account.

Last year, as you may know, "Super Funds" based on ETF performance were created that double the return of ETFs, either short or long. I was in QID, a "super short" fund to take advantage of the last correction. They have a super long fund as well, QLD. These funds permit puts and calls in their management, as well as other "strategies" never before available in a "fund" enviroment.

I have no clue why foreign investors are not allowed by Schwab to invest in the old fashioned mutual fund.

Mike45: have you actually confirmed to your satisfaction that Schwab will allow a Social Security direct deposit and that SSA will make such a deposit directly into a Schwab International Account???

I do believe Schwab does have an affiliate bank which may perhaps qualify as a Fed Reserve Member Bank so SSA may be able to make the deposit. However, I wonder the mechanics of Schwab transferring it into an international trading account. Perhaps their computers are linked so your trading account is your bank account for SSA purposes, I just don't know what account number one would supply in applying to SSA for a direct deposit at Schwab????

[taxout]

Many countries regulate the sale of securities, including mutual funds.

I suspect that many securities firms in the US impose a blanket ban on sale of US securities to non-US residents. The laws of Thailand or Peru or South Africa or wherever may or may not in fact prohibit these sales, but these firms probably find avoiding non-US sales in general far easier than looking into the legal requirements of various far distant countries.

There are also rules, concerned with money laundering and the like, which require securities dealers to "know their customers" and securities firms may feel they can't easily meet these rules in the case of non-US residents.

Edited August 25, 2007 by taxout

[Thanyaburi Mac]

Obviously my mutual fund company is not aware of any such legal block as I have been using my Bangkok address for the past ten years for trades, reports, statements and withdrawal checks. Perhaps it is only for the financial account that they have the problem? I do not use Schwab or have a bank type financial account.

Me, too, but with Vanguard.  Have had an account with them for11 years now, with hardcopy 1/4erly reports send to Thailand.

???

Mac

[Mike45]

Mike45: I agree with the information posted in this thread so far. However, you use the term 'mutual funds" and index funds interchangeably. I will make a distinction, as Schwab treats them differently for foreign investors.

I too was told by Schwab that I could not trade in U.S. listed Mutual Funds. However, I was told I could trade in ETF's, Exchange Traded Funds, a form of mutual fund perhaps.

I have been trading in QQQQ for years now at Schwab, while in Thailand with a Thai address on my account.

Last year, as you may know, "Super Funds" based on ETF performance were created that double the return of ETFs, either short or long. I was in QID, a "super short" fund to take advantage of the last correction. They have a super long fund as well, QLD. These funds permit puts and calls in their management, as well as other "strategies" never before available in a "fund" enviroment.

I have no clue why foreign investors are not allowed by Schwab to invest in the old fashioned mutual fund.

Mike45: have you actually confirmed to your satisfaction that Schwab will allow a Social Security direct deposit and that SSA will make such a deposit directly into a Schwab International Account???

I do believe Schwab does have an affiliate bank which may perhaps qualify as a Fed Reserve Member Bank so SSA may be able to make the deposit. However, I wonder the mechanics of Schwab transferring it into an international trading account. Perhaps their computers are linked so your trading account is your bank account for SSA purposes, I just don't know what account number one would supply in applying to SSA for a direct deposit at Schwab????

The person I was talking to told me that my check could be directly deposited. The email response was only on the question of mutual funds. She told n\me that it was not Schwab's rule it was the SEC that prohibited the sale.

[Crash999]

Just to add my 2 cents, this isn't a Thailand thing. HSBC in HK won't allow a US citizen to open an investment account at all (even if it's to buy HK shares).

[Khnom]

Looks like it's one of those grey areas where tax laws from different countries got all tangled up and each investment house makes its own policy around it to avoid the mess.

I found this article: http://www.iht.com/articles/1994/10/08/mrwh.php

The long arms of the IRS is detailed in the last 3 paragraphs.

[Carmine6]

Looks like it's one of those grey areas where tax laws from different countries got all tangled up and each investment house makes its own policy around it to avoid the mess.

I found this article: http://www.iht.com/articles/1994/10/08/mrwh.php

The long arms of the IRS is detailed in the last 3 paragraphs.

Thanks for the link, it makes sense now. Note it's from 1994, so lots of firms seem to have carried over policies from back then.

There's this from the article:

"The reason is that U.S. fund groups are not allowed to solicit overseas business for their SEC-registered funds, even from U.S. expatriates.

"Our policy is not to sell to Americans overseas because there are just too many regulations," said a spokesman for T. Rowe Price, the no-load fund group based in Baltimore. "If a customer bought our funds while living in the U.S., he can add to them, or switch, but he wouldn't get any mailing about a new fund."

Fidelity Investments, the Boston-based fund giant, takes a more aggressive, but still cautious stance. "If an expatriate with an account phones up and requests a purchase of something, we can do that, but we can't actively market," said Judith Delaforce, a Fidelity spokesman. "We can't send a prospectus to someone unless they're an existing customer and they ask for it."

...

"A U.S. expat without a U.S. address can keep or sell U.S. funds they've already bought through us, but they can't buy new U.S. mutual funds," said Tom Taggart, a spokesman for Schwab. "But that may change," he continued, noting that Schwab is looking at ways to accommodate its U.S. customers overseas more efficiently.

Schwab's lawyers seem to think that by providing the prospectus to someone overseas, they could be seen as soliciting. 13 years later and Schwab is still doing the same thing. Fidelity is taking the position that no, we're not soliciting, someone wants to buy a fund and is requesting the information.

In Fidelity's brokerage accounts, you can actually read prospectuses from many different fund families on the website in .pdf format. They don't make you go through the step of receiving the prospectus in the mail before the purchase, but you have to consent to receiving the prospectus electronically before the order is placed.

[Bill97]

Obviously my mutual fund company is not aware of any such legal block as I have been using my Bangkok address for the past ten years for trades, reports, statements and withdrawal checks. Perhaps it is only for the financial account that they have the problem? I do not use Schwab or have a bank type financial account.

Me, too, but with Vanguard.  Have had an account with them for11 years now, with hardcopy 1/4erly reports send to Thailand.

???

Mac

Some friends and I use 5 different US mutual fund companies (not including Schwab) with our Thai addresses and no US addresses with no problems. Statements are sent to Thailand, full service online transactions are available with some of them (some require a US address for online banking), accounts opened from Thailand is possible. It does help to have a US bank account for electronic transfers in and out of the funds.

Try Vanguard.

[CaptHaddock]

For those of you who recommend maintaining a US address while living abroad, are you worried about liability for state income taxes? Some states, such as California reportedly, can be very aggressive about coming after you to collect state income tax basing their claims of liability on legal standards other than the common sense notion of where you actually live. So, for instance, if you have lived in a state and continue to own property, they may interpret that as an intention to return to residence in the state and regard you as liable for all state income tax in the meantime. This would not be pleasant.

[tracer5050]

Have not thought about state taxes .. something for me to look into anyway . I own personal property as well as seversal investiment propierties in my state i use for income .Thanks for the advise

[Taggart]

I definitely want to keep investing in my Index funds when I live in Thailand. How are other US citizens investing in US Mutual funds?

Thanks

I'm a Canadian living in Canada, and I cannot buy U.S. based mutual funds (not without going through hoops). I resolved the problem by buying ETF's (Exchange Traded Funds) on the U.S. exchanges.

[sfokevin]

This makes no sense to me... What if you save all those years and have built up a 401k and have a regular Charles Schwab account that is invested in mutual funds... You turn 65 and decide to retire to Thailand... Are you saying you then must liquidate all your mutual funds in all your accounts?... I think what the OP has experienced was Charles Schwab just being careful to protect themselves from fraud by a new customer. I would assume if you are a US citizen and have a social security number to inform the IRS of income and they could be comfortable that you are not a money launderer then Charles Schwab would be fine...

Edited August 26, 2007 by sfokevin

[Carmine6]

This makes no sense to me... What if you save all those years and have built up a 401k and have a regular Charles Schwab account that is invested in mutual funds... You turn 65 and decide to retire to Thailand... Are you saying you then must liquidate all your mutual funds in all your accounts?... I think what the OP has experienced was Charles Schwab just being careful to protect themselves from fraud by a new customer. I would assume if you are a US citizen and have a social security number to inform the IRS of income and they could be comfortable that you are not a money launderer then Charles Schwab would be fine...

The article linked by Khnom explains it.

http://www.iht.com/articles/1994/10/08/mrwh.php

[thaihome]

For those of you who recommend maintaining a US address while living abroad, are you worried about liability for state income taxes? Some states, such as California reportedly, can be very aggressive about coming after you to collect state income tax basing their claims of liability on legal standards other than the common sense notion of where you actually live. So, for instance, if you have lived in a state and continue to own property, they may interpret that as an intention to return to residence in the state and regard you as liable for all state income tax in the meantime. This would not be pleasant.

The Global Mail link suggested earlier gives you a Texas address. Texas has not state income tax. There are also several such services located in Florida, which also does not have state income tax.

If you own property and receive rental income in a state with income tax, you have to file non-resident returns. Calif. is notorious for trying to make you a resident but it is possible to escape resident status. I have several friends that own property there and they all have done it successfully. I recently went through it myself in another state and I don’t even own property there. After about a year they finally ruled I was not a resident.

Also note that with the a VOIP phone from a US provider you can actually have a US phone number, with the area code of your US address while living overseas.

TH

[Gary A]

When I first retired, I had an account with Scottrade. I tried to change my address to Thailand and was told I must reside in the US to have a Scottrade account. I sold out and closed the account. My tax accountant is also a broker for LPL Financial. I seldom used him because the fees are too high but I have bought and sold my stock and mutual funds through him every since. I have had no problem buying or selling without a US address. I wasn't happy about having a US address because of state tax liabilities. If you use a US address, I'd suggest you check out the tax liabilities.